S&P warns against excess growth in bank lending

Standard & Poor’s has aired its concern over the robust pace of growth in bank lending in Asia-Pacific, saying excessive credit may eventually spawn economic problems.

Also, faster inflation is believed to be another emerging risk as the banking sectors in the region continue to lend aggressively.

“In contrast to Europe and the US, private-sector credits in Asia Pacific have grown over the past several years. The fast pace of loan growth, particularly in emerging markets, could encourage excess investment and lead to economic imbalances,” S&P said in its latest report, “Asia Pacific Banking Outlook 2013: Shakier Asset Quality a Key Risk.”

Although banks in Asia-Pacific are generally much healthier than their counterparts in the United States and the euro zone, S&P said failure to monitor lending activities now could lead to problems in the future.

In the case of the Philippines, lending growth has been sustained at a double-digit pace on the back of banks’ enormous liquidity. The robust pace of credit expansion also is attributed to historically low interest rates, which have encouraged consumers and enterprises to secure loans.

The Bangko Sentral ng Pilipinas earlier said that outstanding loans from banks in the country grew year on year by 15.4 percent to P3.18 trillion in January. This has pushed the annual growth rate in the domestic economy’s liquidity, measured in terms of M3, to 10.8 percent in January from 7.2 percent in the same month last year.